Customer Type: PE Firms
Diversifying Talent in a Digital-First Consumer Products Startup
Service Area: Human Capital – Specialized Recruiters
Client Type: Lower-Middle Market Firm
Service Provider Type: Non-Executive Recruiting Firm
Industry: Consumer Products
The Need
Diverse Talent for a Dynamic Startup
A consumer products startup, operating as a portfolio company of a lower-middle market PE firm, was on a mission to enhance its team with diverse talents. Roles in digital marketing, design/creative, product development and people/operations were open, requiring a recruiting firm that understood the startup’s digital-first, data-driven and agile nature.
The Challenge
Complex Landscape of Multi-Role Hiring
The company didn’t have a dedicated talent partner, making the hiring process, especially for multiple roles, daunting. The urgency to hire candidates who could seamlessly blend into the startup’s fast-paced environment and contribute to its growth trajectory was paramount. Traditional recruiting firms, primarily aligned with CPG companies, lacked the finesse to meet the unique demands of a rapidly evolving digital landscape.
How BluWave Helped
Connecting with Specialized Recruiting Expertise
BluWave acted swiftly, utilizing its rich network to connect the PE firm with a specialized recruiting firm. This firm was not only adept at navigating the consumer products industry but also came with a robust expertise in fostering talent for digital-forward, high-growth environments. BluWave’s connection ensured that the recruiting firm could offer a tailored, retained search approach, aligning with the portfolio company’s nuanced needs.
The Result
Streamlined Path to Talent Acquisition
Through BluWave’s strategic connection, the portfolio company worked with a recruiting ally that understood its unique challenges and needs. The specialized recruiting firm’s ability to navigate the digital realm, coupled with its flexibility and adaptability, empowered the portfolio company to move forward confidently in its talent acquisition journey, ensuring that each role was filled with candidates who could thrive and drive innovation in a dynamic startup environment.
Strategic Buy-Side Search in Healthcare Services
Industry: Healthcare Services
Service Area: Commercial Due Diligence
Client Type: Lower-Middle Market Firm
Service Provider Type: Buy-Side Advisory Firm
The Need
Multi-Site Roll-Up Strategy in Healthcare Services
A lower-middle market private equity firm, with a successful history in executing multi-site roll-up strategies, sought to delve into the healthcare services sector. Their vision was clear: identify a healthcare practice that resonates with their investment thesis, marking the inception of a broader roll-up strategy. The ideal acquisition would be a multi-doctor practice in the Midwest, South or Southeast, boasting more than $5 million in annual net collections and an entry EBITDA above $2 million.
The Challenge
Precise Buy-Side Search
The challenge was twofold: identifying a healthcare practice that not only met the stringent financial criteria but also aligned with the firm’s strategic vision for a multi-site roll-up. The firm sought a partner who would reinvest back into the business, ensuring a synergy that would fuel the envisioned growth and expansion. The search required a nuanced understanding of the healthcare services sector, coupled with a strategic approach to identify practices that resonated with the firm’s investment thesis.
How BluWave Helped
Facilitating a Connection Tailored to Strategic Success
BluWave utilized its extensive network to connect the firm with a specialized buy-side advisory firm. This partnership was instrumental in navigating the complexities of the search, leveraging deep industry experience and a nuanced understanding of the private equity landscape. The advisory firm’s strategic approach and geographical insights were pivotal in identifying healthcare practices that aligned with the firm’s vision and investment thesis.
The Result
Poised for Transformative Growth
Through the connection facilitated by BluWave, the firm was empowered to execute a strategic buy-side search that resonated with their investment thesis. This partnership has set the stage for the identification of promising healthcare practices, ready to be woven into a transformative multi-site roll-up strategy that echoes the firm’s vision of growth and success in the healthcare services sector.
This was a good firm to work with. They were organized and professional. We would recommend them to other clients.
Partner at PE Firm
Versatile Controller for an Innovative Legal Tech SaaS Business
Industry: Technology – Software – Legal
Service Area: Human Capital
Client Type: PE Firm
Service Provider Type: Non-Executive Recruiting Firm
The Need
Building Robust Financial Infrastructure for Growth
A burgeoning U.S.-based legal tech SaaS business, backed by a PE firm, was on a mission to revolutionize legal processes through automation and analytical insights. With a promising trajectory, the company sought to bolster its financial infrastructure to support and sustain its rapid growth. The search was on for a versatile controller, someone who could not only manage the day-to-day financial operations but also strategize and steer the company toward financial optimization.
The Challenge
Industry, Role Nuances
The ideal candidate would be someone adept at wearing multiple hats, capable of handling everything from accounts payable and receivable to strategic financial planning. Given the company’s innovative focus on legal tech, the controller would also need to navigate conversations with various stakeholders, including founders who might not be deeply versed in financial reporting, and investors and board members requiring sophisticated financial insights. The geographical location and the specific industry experience of the candidates were also crucial factors.
How BluWave Helped
Tailored Approach to Hiring the Right Fit
BluWave connected the private equity firm with a specialized non-executive recruiting firm with a robust background in controller roles, a deep understanding of early-stage business dynamics and a geographical alignment with the West Coast. The approach was tailored to ensure that the candidates the search firm presented not only met the technical requirements but also resonated with the unique culture and vision of the portfolio company.
The Result
Strategic Addition to Foster Financial Excellence
BluWave’s strategic approach and network enabled the legal tech SaaS company to identify a controller who perfectly aligned with their needs and vision. The new hire brought a blend of operational expertise and strategic acumen, ready to build a robust financial infrastructure that would support the company’s innovative trajectory and growth aspirations.
“My feedback is very positive.”
-Managing director of PE firm
Interim Executive Best Practices: Trends in Short-Term Leadership Roles
Why should a business use an interim executive?
It can be a great way to bridge the gap between full-time hires, give a potential long-term hire a “tryout,” train up less experienced candidates, guide a company through a crisis or even prepare a business for sale.
Whatever the case, interim CFOs, CMOs, CHROs, COOs and the like can be money well invested.
To get the most out of these temporary executives, though, businesses need to have a plan.
BluWave’s Richmond Donnelly discussed the best practices of using interim C-suite talent on a webinar with Mark Steenhoek, Managing Director, Operations, of The Stephens Group and Bryan West, Managing Director, Talent at Resurgens Technology Partners.
Here are some of the actionable insights you can apply to your business’s interim executive strategy.
When, How To Work with Interim Executives
While there are many situations in which an interim executive might be a good fit, the panelists outlined the most common ones their firms face.
“There’s good reasons and bad reasons that we would hire. I’d say that we find ourselves more in the camp with the bad reasons, and I’d describe those as two,” Steenhoek said. “It’s a crisis situation. Somebody leaves…or it’s a situation where we started looking in this a little bit more post-COVID in that we would have an open CFO role and then it takes nine to 12 months to fill it just because the market was so tight and difficult to find that perfect fit.”
West added that he is a big fan of the “try before you buy” approach. He said he’s encouraged by the number of his peers who are like-minded.
“That was actually reassuring,” he said. “That’s a great way to build a relationship and we’re always open to that.”
Top Interim CXO Use Cases
Whatever the use case, interim leadership is consistently one of the most-used services in the Business Builders’ Network, according to BluWave’s quarterly insights.
Based on the proprietary data collected from working with hundreds of private equity firms and thousands of leading businesses, the two most-used interim executives are CFOs and CHROs.
Read more about how each of these crucial roles is used:
Based on a live poll of webinar attendees, most PE firms fill multiple interim executive roles per year, taking 3-6 months to do so.
At BluWave, however, we connect you with a short list of exact-fit candidates within a single business day of your initial scoping call.
Why Hire an Interim Executive?
Beyond broader use cases, PE firms and their businesses usually have a specific set of tasks they need this temporary hire to complete.
“We’re able to go in and very specifically orient to on a project basis like, ‘Hey, does this person have experience or the skills to knock out kind of a more tactical list of things?’” West said.
He said that while the overall goal may be the same as when you bring in a full-time C-suite hire, the selection criteria is “quite different” based on what needs to get done.
Echoing BluWave data, Steenhoek said interim CFOs are their most common interim executive hires. The tasks each one is expected to accomplish tend to be the same, with variations depending on the company’s industry.
Interim Executive Criteria, Selection
Moving beyond the to-do list of items to accomplish, what is it that the world’s top PE firms and businesses look for in interim executives themselves?
West said that having done so many hirings in the past makes it easier to pick up on red flags in candidates. Beyond that, he relies on experience to choose the right person.
“We need somebody that’s been there, done that,” he said. “We don’t want to burn six months of time or three to six months of time on building a function.”
Steenhoek agreed, saying that is his top priority, too.
“I think the second would be, especially if it’s a leadership thing…radical transparency,” he said. “You’re just going to be able to really work together hand-in-hand, which equates to low-ego. They know what they’re there for.”
Setting Interim Executives Up for Success
Once someone is in the seat, the team that hired the individual plays a significant role in their success. How do these leaders set their interim hires up to get the job done?
“There is the team integration and the business integration [and] the CEO is the primary quarterback there, assuming it’s a direct report to the CEO,” he said. “But as far as project-managing the task list…that more often than not happens at our level.”
Steenhoek added two things that he believes are essential in these situations.
“I think really clear communication around what you need and alignment that they’re oriented and really focused on what you tasked them to do,” Steenhoek said. “The second is just being really clear on alignment related to, Are they interim? Are they permanent?”
BluWave is here to connect you with best-in-class, niche-specific interim executives to help with crisis management, leadership transitions, “try before you buy” and other relevant scenarios.
“Reach out to us at any point if we can ever be supportive with anything you all need,” Donnelly said. “We’re here to help you win.”
Contact our research and operations team to scope your needs and get quickly connected with the service provider you need in less than one business day.
How To Raise Prices Strategically with Sales Team Buy-In
When input costs increase, businesses must adjust their pricing strategy accordingly. But it’s not as simple as passing along those costs to the consumer.
First, the sales team must buy in to the new strategy. (This can be particularly challenging for private equity firms and their portfolio companies.) Secondly, you must do so in a way that doesn’t scare off the customer.
But as BluWave CEO and founder Sean Mooney discussed with ParkerGale’s Cici Zheng on the Karma School of Business podcast, those fears are often unfounded when you dig a little deeper.
Let’s learn more from these two about how to strategically raise prices, whatever business and industry you’re in.
Challenges of Raising Prices
Sales Team Buy-In
“I think our portfolio companies might be hesitant to think about price increases or think about value-based pricing,” Zheng said.
Mooney agreed, calling it the “number one area that’s underutilized” by private equity firms that BluWave supports.
“In part because it gets the most resistance from the portfolio companies, particularly from sales leadership,” he added. “Because it’s really scary if you’re a head of sales and you say you got to raise price.”
Zheng said this is best overcome by generating belief in the company’s products or services.
READ MORE: Sales Pipeline Funnel: Methodology for Businesses
“If you think about the amount of investment that we’re putting in, in an ideal world, your best-fit customers are also valuing what that is and you’re able to get a value-based price for it,” Zheng said. “At the end of the day, it comes back to, if we really feel [that] the types of companies we invest in have great products, great NPS scores, great retention scores.”
Retaining Customers
Related to resistance from the sales team is often a fear that customers will be scared off by a higher price point. And the thought of being the one to share that increase can be daunting.
But once again, belief in the product is a great weapon in this situation.
“What are our product managers and heads of engineering and engineering talent doing? They’re continuing to invest in that product,” Zheng said. “Hopefully we’re able to convey this to the sales team who have to be at the front line to convey it to the customer of like these are not price increases for the sake of price increases.”
Value-Based Pricing
The beauty of value-based pricing is that businesses attract customers who are willing to pay for a superior product. Portfolio companies owned by ParkerGale and like-minded private equity firms aren’t courting bargain hunters anyway.
Zheng said that this high-quality approach “justifies what we think this product actually provides to you. And if you were really looking for the cheapest price, then we wouldn’t be having this conversation because that’s usually not the positioning that we have.”
After all, if the business is working so hard to create a quality product or service, why wouldn’t they expect customers to be willing to pay more?
“We’re going and improving the products and updating the modules and features and all these things,” Zheng said. “Are we on the flip side also making sure we’re getting that value-based pricing from our customers?”
Knowing that pricing isn’t the top priority for their target customers gives portfolio companies more flexibility, dousing the fear of scaring them off.
Data-Driven Pricing Strategies
No matter how much a business believes in its products and services, it can’t blindly adjust its prices and hope for the best. They must make data-based decisions.
One way to do this is by paying close attention to macroeconomic factors.
“We’re thinking a lot more intentionally about pricing and making sure that we’re not just staying flat, we’re looking at what’s going on in the market,” Zheng said.
There are other metrics that can influence a pricing strategy, though. According to Zheng, NPS scores and retention data are strong indicators of whether a business has a “very solid product.”
READ MORE: How To Analyze Sales Data: Tools, Examples, KPIs
For private equity firms, much of this crucial research can be done before a company is ever acquired.
Zheng said that during the commercial due diligence phase, ParkerGale often deploys voice of customer studies to learn what are customers’ top three key purchase criteria. Pricing seldom makes the list.
“Especially when we’re selling enterprise software, these are mission-critical tools and products,” Zheng said. “The customer is not looking for the cheapest one.”
READ MORE: What is Commercial Due Diligence?
In-depth analysis can also help companies learn when they have taken their increases too far, allowing them to adjust back down.
“I would argue if you’re never losing on price, then you’re priced too low. You should be losing a certain percentage of your deals on price,” Zheng said. “But if you can collect the data on the other side, if you’re doing win-loss analysis and calls like that, then you should be able to say, ‘OK, we are hearing now that we have enough actual data, not anecdata, to say we are actually losing on price too much, and so therefore we need to adjust.’”
READ MORE: Voice of Customer Metrics, KPIs, Analytics
Benefits of Pricing Consultants
As meticulous as private equity firms and other top business leaders are about their companies, a world-class pricing strategy often requires world-class help.
Mooney mentioned how underutilized pricing resources are, but that’s not because they’re in short supply.
The Business Builders’ Network is full of pricing experts who work on an industry-specific basis. They know the questions to ask, the data to analyze and the levers to pull to make sure you’re setting prices with confidence.
“We’re in contact with the service providers in our network nearly every day,” Co-Head of Research and Operations Keenan Kolinsky said. “Before clients even reach out, we already know which providers will likely be best suited for their pricing project. That way, we can hit the ground running as soon as we scope a client’s need.”
These third-party resources are experts in segmenting customers, identifying value drivers, developing measurement tools and pricing structures, conducting sensitivity analyses and more.
They’re on standby to help you determine your target customer base’s key decision factors, willingness to pay, preferences and perceptions.
Lastly, they’ll present this information – with speed and accuracy – in a way that’s actionable for your business.
Contact our research and operations team today, and tap into the same invite-only network that the world’s best PE firms – from ParkerGale and beyond – use to set their pricing strategies.
Within a single business day, you’ll be connected to a shortlist of options that will be chosen for your exact situation and vertical.
What Makes a Commercial Due Diligence Firm ‘Specialized’?
Private equity firms face fierce competition for new deals. Even when the economy is strong, there could be dozens of groups vying for the same target.
When the deal market is stagnant, though, it can seem impossible to find a viable acquisition, let alone have the winning bid.
BluWave founder and CEO Sean Mooney encountered this challenge in his nearly 20 years in private equity.
“As the competitive tension of supply and demand intersected in private equity with more and more capital under management, chasing the same supply of deals was causing pressure for me to say, ‘I can’t just be a market taker anymore,’” Mooney recently shared. “’The surplus is being skimmed. I have to see something that no one else can see.’”
Mooney since started the Business Builders’ Network to help other leaders solve this very problem. He recently spoke with Andrew Joy, partner at Hidden Harbor, about how PE firms use specialized commercial due diligence providers to cut through the noise and rise above competitors.
So how do the world’s top private equity firms distinguish themselves in this cutthroat environment? One way is through commercial due diligence.
What is Specialized Commercial Due Diligence?
Specialized commercial due diligence can only be performed by firms that have deep experience in the target’s specific industry and are ready to go well below the surface to provide exclusive insights.
At a high level, a commercial due diligence project usually involves looking at a company’s market size, its total addressable market, conducting a competitive analysis and performing a voice of customer study.
READ MORE: What is Commercial Due Diligence?
“The goal of commercial due diligence is to validate the story that the target’s telling or to identify the reality of the marketplace out there so they can make an informed decision,” according to Don Jenkins*, the founding partner at one of the specialized diligence firms in the BluWave network.
While the details of the process are much more nuanced, a world-class CDD firm will be able to get up to speed faster, give private equity firms a deeper understanding of the business and equip them with a significant competitive advantage over other PE firms that conduct more general due diligence.
Looking Beyond the Acquisition
When PE firms consider buying a business, they aren’t just thinking about its present-day value. They’re also evaluating what an exit will look like and how much value they can create long-term once the company is no longer in their hands.
That’s why it’s so important for them to thoroughly investigate every potential target. Mooney said that PE firms have moved beyond a “trust but verify” mindset and are looking even longer term than they may have been a decade ago.
“You’re not building for the next five [years] because if nothing else, if you’re going to sell to the next person, there’s got to be some cream left to build it,” Mooney said. “If you’re only thinking three to five years ahead, you’re playing a chess versus checkers game.”
Differentiated Data
“As information and data have become more commoditized and more accessible, it’s becoming harder and harder to really find areas where you have a competitive advantage,” Joy said. “We like to say, ‘What’s our angle on this target or deal?’”
Mooney noted that investment banks do a great job exposing as much value creation as possible within a company. But PE firms that don’t dig deeper are going to be working from the same perspective as everyone else.
READ MORE: Data Consolidation: Benefits, Challenges, Processes
“The undifferentiated commercial diligence firm is calling the expert networks to get the insights about the markets that they’re sharing,” Mooney said. “Odds are if one over the other is not using a specialized group that sees something that the expert networks don’t, everyone’s getting beta. They’re spending hundreds of thousands of dollars on the sell-side study, which is calling two or three market network expert networks.”
Joy said that when PE firms use the same tools as everyone else, “that’s just the ante to get into the game.”
He added: “You really have to then figure out how this target or this opportunity fits within an angle that you can play. Whether that’s operationally, whether that’s commercially, so that you can justify to your committee why we think this asset is more valuable and we’re going to be the winning bid.”
Closing with Confidence
When commercial due diligence is done right, private equity firms can make acquisitions with confidence.
“By the time we close on a transaction, we have a really strong hypothesis around what are the value-creation levers that we are going to pull over our whole period to create outsized market returns,” Joy said. “And that’s informed by the commercial due diligence.”
When Hidden Harbor is deciding on a target, Joy said they like to ask where the company’s right to win is, and how they can get there.
“It’s amazing to see sometimes and that when you do a full cycle of investment from closing to selling and you look back and you say, ‘What were the three biggest value-creation drivers of our return?’ And you’re able to say, those were the three that we identified in diligence. That’s pretty powerful to have that amount of conviction and be right about that and being validated.”
BluWave has a close relationship with a deep bench of world-class, specialized commercial due diligence providers.
Each one has been vetted before joining the invite-only network and is re-vetted before they’re matched with private equity firms.
When you contact our research and operations team, they’ll connect you with a shortlist of service providers – with industry-relevant experience – in less than 24 hours.
Start your project today to get the differentiated insights that a specialized commercial due diligence provider can uncover.
*Privacy is important to us. While the source and company name have been changed, these are real quotations from a real service provider in the BluWave Business Builders’ Network.
Manufacturing Momentum: Challenges, Opportunities in the Modern Landscape
Manufacturing businesses are faced with evolving challenges, especially amid an uncertain economy, constantly pressured from different angles by policy decisions and global events. BluWave sees this every day in the projects it supports for hundreds of private equity firms and thousands of businesses.
Whether in human capital, operations, growth strategy or technology, today’s business leaders have their hands full.
In a recent webinar, Co-Head of Research and Operations Keenan Kolinsky discussed with Product Manager Ryan Perkins the challenges and opportunities in this industry.
The Rising Importance of Human Capital in Manufacturing
The manufacturing sector was once driven primarily by machinery and raw materials. But now it’s recognizing the importance of its most valuable asset: people.
In fact, 74 percent of manufacturers say that “attracting and retaining a quality workforce” is a top challenge, according to the National Association of Manufacturers (NAoM).
Interim executives have emerged as a pivotal solution in this landscape. These temporary business leaders bridge critical leadership gaps, ensuring that companies don’t lose momentum during transitions.
“Interim executives can help businesses keep their foot on the value creation pedal,” Kolinsky says.
Their role is especially crucial in a volatile economic environment where leadership vacancies can’t be left open for extended periods.
But it’s not just about filling gaps. The recruitment process itself is undergoing a transformation. The emphasis is shifting from generalist recruitment approaches to specialized, industry-specific strategies. Manufacturers are realizing that to drive growth and innovation, they need the right people in the right roles, making executive searches a top priority, too.
Operational Excellence: The Backbone of Manufacturing Success
Turning toward a more traditional problem, nearly half of manufacturers identified supply chain issues as a top challenge, per the NAoM. Even with the peak of the COVID pandemic disruption behind us, this issue persists.
“With manufacturers…experiencing a variety of economic and even geopolitical pressures, manufacturing operations and supply chains simply have to be tighter than ever to achieve desired margins and outcomes,” Kolinsky said.
In response, many manufacturers are turning to expert third-party resources to optimize their supply chains. From right-sizing inventory to reducing lead times and optimizing supplier networks, the focus is on efficiency, cost savings and performance.
Beyond the supply chain, there’s a broader push toward operational excellence. Lean Six Sigma principles, rooted in the Toyota production system, are being adopted to streamline processes, identify bottlenecks and drive efficiency. The goal? Faster, more efficient production with greater precision.
Strategizing for Growth in a Competitive Landscape
A weaker domestic economy can poses unique challenges. During those times, growth strategy becomes the north star guiding manufacturers. But how do they chart a course for growth amid such turbulence? The answer is data-driven strategies.
“Markets shift often and they shift quickly,” said Kolinsky, who emphasized the importance of real-time insights. “Base your strategy or plan for growth on current market data and dynamics.”
READ MORE: Analytics, Data & AI Resources
By leveraging data analytics and visualization tools, manufacturers can gain actionable insights, track KPIs and make informed business decisions.
With the advent of more accessible artificial intelligence tools, many businesses in the manufacturing industry and beyond have been focusing on essential pre-cursor activities focused on data hygiene. These will lay the groundwork for a more seamless integration once they’re ready to use AI to accelerate growth.
Embracing Technology: The Future of Manufacturing
The digital revolution is reshaping the manufacturing landscape.
According to Alithya, 43 percent of manufacturers came into 2023 planning to increase their year-over-year spending on technology. it’s clear that the industry is gearing up for a tech-driven future.
“The manufacturing industry is really digitizing rapidly and in more ways than one,” Kolinsky said.
From IT strategy to system selection and implementation, manufacturers are recognizing the need to align their technology tools with broader business objectives.
But it’s not just about adopting the latest tech solutions. Effective change management is crucial. As manufacturers transition to modern systems, they must ensure that their teams are well-equipped and trained to leverage these tools to their fullest potential.
BluWave is here to help you connect with best-in-class, niche-specific manufacturing resources to help with human capital, operational excellence, growth strategies, technology and more.
Contact our research and operations team to scope your need and get quickly connected with the service provider you need in less than one business day.
Joe DeLuca of NewSpring Capital: Navigating Challenges with Empathy, Strategy
Joe DeLuca recently joined the Karma School of Business podcast to talk private equity. The operating partner with NewSpring Capital spoke with host Sean Mooney about the significance of building genuine relationships during crises, the evolution and adaptability of NewSpring’s value creation model and the unparalleled power of collaboration, drawing parallels from the Manhattan Project.
Their insightful conversation sheds light on the human-centric approach to business and the pivotal role of adaptability in the private equity landscape.
Here are some of the top takeaways from their conversation.
3 Takeaways from Joe
1. Building Relationships in Crisis
In the face of unprecedented challenges, such as the onset of the COVID-19 pandemic, DeLuca underscored the importance of human connection and understanding.
“I tried to understand what the people that were working at our business, just what was going on so that we could relate to each other,” he said. “Then I could ask of them, ‘Hey, OK, we really need to do X.’ And then there was some empathy and some relationship building in the first week that I just felt was really critical because it was all happening real-time.”
This sentiment is not just about business strategy but about genuine human empathy. By taking the time to understand the personal challenges faced by employees, leaders can foster a sense of unity and shared purpose.
“People are really what drive these companies,” Mooney added.
In an era where technology and automation are at the forefront, it’s a poignant reminder that at the core of every successful venture are the people who make it run.
2. Evolving Value Creation Model
Adaptability is a hallmark of successful businesses, and NewSpring’s evolving value creation model is a testament to this.
“We started several years ago with what we call the value creation team,” DeLuca said. “The concept was, ‘w’Well, let’s get somebody from each of the disciplines. Let’s have a finance person, a marketing person, an HR person, an IT person.’ You sort of get the idea. ‘And let’s have them on tap to call on them and add value where and when needed.'”
This shift from a broad, external expert-based approach to a more focused, strategy-specific model highlights the importance of being nimble and responsive to the unique needs of each investment.
“The biggest single use case we see in private equity is people,” Mooney said. “It’s every quarter, and it gets bigger and bigger and bigger.”
The emphasis here is clear: while strategies and models are vital, it’s the people who execute them that truly drive value and success.
3. The Power of Collaboration
The story of the Manhattan Project, as recounted in “The Making of the Atomic Bomb,” serves as a powerful metaphor for the importance of collaboration in achieving seemingly insurmountable goals.
DeLuca drew attention to the unlikely partnership between General Leslie Groves and Robert Oppenheimer.
“These guys pulled it off, and they were completely opposites,” he said. “They were like the stereotypes.”
This collaboration between two starkly different individuals underscores the idea that diverse perspectives can come together to achieve greatness.
“If you work with great people, you kind of understand the situation, come up with a plan,” Mooney said. “If you’re tenacious and you’re going to find a way, and I think that so much just reflects the whole conversation that we’ve had here today.”
The underlying message is clear: with the right team and a shared vision, any challenge can be overcome.
DeLuca’s insights on the importance of understanding and connecting with employees during challenging times, the adaptability required in the ever-evolving world of private equity, and the lessons drawn from historical collaborations, make his episode well worth a listen.
When you’re done listening, head to the main BluWave podcast page for more conversations with business leaders.
Joe DeLuca, NewSpring Capital | Reassess and Adapt: A Conversation on Pivoting Business Models and Organizational Structures
What is Commercial Due Diligence?
Private equity firms perform commercial due diligence (CDD) to evaluate the growth and profitability of a potential target acquisition.
A process that was once reserved for large cap funds with extra capital to spend on evaluating the soundness of the investment, CDD is quickly becoming a necessary standard operating procedure for all proactive PE funds.
“Each deal’s different and may require a different slate of providers to get the most out of each diligence phase or diligence stream,” says Keenan Kolinsky, head of research and operations at BluWave.
Private equity firms have discovered that in order to drive alpha in a sea of beta, smaller, more specialized commercial due diligence providers can provide them with more unique insights quicker.
What is Commercial Due Diligence?
Commercial due diligence is a systematic evaluation of a target company’s commercial viability before making an investment decision. It’s an extremely thorough process that, when done well, leaves no stone unturned before papers are signed.
“Commercial due diligence is a term of art for a market study. It’s typically provided by market strategy firms,” BluWave founder and CEO Sean Mooney shared on a recent webinar. “It is standard operating procedure by the best private equity investors in the world.”
It comes as no surprise, then, that CDD is consistently No. 1 due diligence category in the BluWave Activity Index.
That’s why the invite-only network of third-party resources is loaded with world-class diligence providers, such as Don Jenkins* of CommDil Inc.
“When you think about commercial due diligence, there’s often a fairly typical set of objectives,” Jenkins says. “Those will include understanding the market size, how big is the market, how is it segmented, what are the key segmentations or different types of businesses that constitute that market.”
From start to finish, it usually takes weeks, if not several months, depending on the target’s size and complexity.
Specialized Due Diligence
Any consultant can provide intelligence on a target’s total addressable market, prospects for growth, competitors, risks and other vital information through initial industry research. But specialized consultants with pre-existing industry knowledge don’t have to waste their time to gain a sense for the industry.
Instead, they can provide a heightened sense of value by using their base knowledge to dig deeper and therefore provide more in-depth insights in the same amount of time.
READ MORE: What is Buy-Side Commercial Due Diligence?
These steps give investors a deeper understanding of the target company’s business model, financial performance, competitive landscape, and operational and legal risks.
A benefit of specialized commercial due diligence providers is their ability to get up to speed faster. Because they aren’t being run to with projects across various industries, their recent experience primes them to hit the ground running. Generalist firms, on the other hand, will run expert network calls to get smart on an industry.
“We have thousands and thousands of projects, tens of thousands of their quals built into this cognitive engine that we’ve built, and then we’re constantly checking with them on a capacity,” Mooney shared on the webinar of BluWave’s matchmaking process. “By the time the PE firms calls, we already know who they need, why they need it, what their quals are, what their availability is, and then have the ability to compel them to bring the A team to our clients.”
How is CDD Performed?
Kolinsky says there are several variable diligence factors to consider, “such as the target’s industry, the deal size, target technology or operational nuances, timing and more.”
BluWave supports private equity clients by connecting them with the diligence providers whose functional capabilities, expertise and experience account for these different factors.
Here are the four key steps the service providers in the BluWave-grade network take when performing commercial due diligence:
1. Comprehensive Market Analysis: Size
This is where the target company’s market position as well industry trends and growth potential are analyzed.
“We’ll be doing market forecasting, understanding the headwinds and tailwinds that affect growth,” Jenkins says. “We’re looking at trends that exist out there, whether it’s technology trends, regulatory trends, just other emerging competition.”
On the commercial due diligence webinar hosted by BluWave, Andrew Joy of Hidden Harbor talked with Mooney about the importance of looking beyond a private equity firm’s holding period when evaluating a business.
“It’s answering the fundamental question of, ‘What do we believe this business will grow at over our whole period and beyond?'” Joy said. “[The scope is] more 10, 20 years because just as important as the next five years’ growth is what matters just as much as the growth beyond that as you think about your exit and the exit multiple.”
2. Comprehensive Market Analysis: Total Addressable Market
Here’s how Scott Bellinger, BluWave’s head of sales, defines this step:
“Of the overall market, how much is currently addressable by the target? What else could they do to get into new markets and increase their total addressable market?” Bellinger says.
He added that businesses that already have a high penetration rate may need for new markets if they want to continue to grow.
Joy shed more insight on this stage in the webinar.
“By the time we close on a transaction, we have a really strong hypothesis around what are the value creation levers that we are going to pull over our whole period to create outsize market returns,” he said. “What adjacent markets should this target enter…and how do you capitalize on that?”
3. Competitive Analysis
Bellinger says there are key questions to answer at this stage: “Who does your business compete against? How are they viewed in the market against competitors? Who else has taken up market share? What’s the differentiation between your business and others?”
Jenkins agrees, and noted that this is a fundamental part of hits firm’s commercial due diligence exercises.
“Typically we’re looking at understanding the competitive landscape that the target company is competing against, and how they’re positioned in terms of share and their offering, and how they position themselves in the marketplace,” Jenkins says.
Read More: Hire the Right Temporary CFO
4. Voice of the Customer
Finally, PE firms and other acquirers need to know how current and potential future customers view the target business.
That’s why Jenkins says “there’s usually a voice-of-the-customer piece.”
There are many ways this can be done, but getting first-hand information from clients and customers is essential to understanding the business. Expert third-party firms will not only know which tactics to use for specific industries, but also how to connect with the customers in a meaningful and insightful way.
READ MORE: 5 Steps To an Effective VoC Strategy
We have recently seen many firms turn to more specialized providers due to the valuable insights gained.
In times where other PE firms are struggling to get the right information on the timeline they need, equipping yourself with unique data quickly will provide you with competitive edge.
“The deal process is laborious and it’s fatiguing, but really taking the time upfront to find the right group that will answer the critical questions that you’re really have to will pay dividends,” Joy said on the webinar. A lot of groups that’ll say yes to the project, but the ones that will provide real value is a lot smaller.”
The expertly vetted service providers in the BluWave network have performed countless commercial due diligence analyses for hundreds of PE firms.
“In private equity, one size does not fit all,” Kolinsky says.
We vet each resource before they’re admitted into the network, and again before connecting them to you. After your initial scoping call with our research and operations team, you’ll meet the two or three “best fits” within a single business day.
Tell us about your project now, and we’ll get started with selecting your tailor-made solution.
*Privacy is important to us. While the source and company name have been changed, these are real quotations from a real service provider in the BluWave Business Builders’ Network.